Investment Strategies
Don't Be Fooled By Misconceptions Over Africa, Argues Fidelity
Investors holding a negative view on investment into Africa, who are the majority, are wildly mistaken to do so, according to Nick Price, emerging markets portfolio manager at Fidelity International.
The widespread perception of Africa is distorted by images portraying Africa as a war-torn, poverty-stricken land, says Price. “But the conventional view is not matched by my experience on the ground. To me, Africa is a classic example of the gap between perception and reality which leads to investment opportunity,” he said.
Of course this conventional view is not entirely unfounded. Africa’s history of corrupt leaders has been well documented and can be seen to this day in countries such as Ivory Coast and Libya, culminating in civil war. Nonetheless Price believes there is currently great scope for investment in Africa.
According to Price, economic growth in Africa has averaged 6 per cent over the last decade, superior to that seen in India between 1995 and 2005. Of the current 10 fastest growing economies in the world, seven are African. In one striking example, Angola’s growth has been greater than China’s over the last decade.
Fidelity points out that only 40 million of the 400 million hectares of the land between Senegal and South Africa that is fit for farming is actually used. This is something that can be exploited in years to come, and can be supported by Africa’s rapidly growing workforce, which the firm projects will more than double by 2040.
The expanding labour force in Africa can also support the development of other industries, such as those based around Africa’s vast commodities store, according to Price. He predicts one third of total iron ore traded globally over the next decade will come from West Africa, which currently barely contributes to the iron ore traded worldwide.
While it appears most investors do not feel Africa is ready for substantial investment, and will remain focused on emerging markets in other continents, Fidelity International’s emerging markets portfolio manager respectfully disagrees.
